The Bank of England expects to reduce interest rates again while the Great Britain’s economy is stagnant
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The Bank of England is expected to lower interest rates this week for another quarter, as policy creators are measuring the signs of the weakening of the British economy, along with the possibility of a short -term takeover of inflation.
Financial markets are betting that the Boa Monetary Policy Committee will reduce its official rate at 4.5 percent on Thursday in the third decrease in borrowing costs in just over half a year.
But this week’s discussions should be complicated by the appearance of re -establishing inflation in the UK, along with the global trade war after US President Donald Trump imposed tariffs in Canada, Mexico and China.
Boe also struggles with relaxed confidence of business and surveys in the UK indicates corporate release. Data suggest that the economy in the UK probably failed to grow in the last months of 2024.
“We believe that weakness in recent growth data, the exacerbation of the labor market indicators and the gradual progress with the inflation of fundamental services will mean that there is a wide support for a [quarter-point] He cut, “said Jari Stehn, a major European economist at Goldman Sachs.
The markets are prices this year in reducing about three rates, as Boe is moving in salary pressures in the company, along with evidence of the stagnation of the economy. Many economists expect 8-1 voices on MPC in favor of the downward moves, and Catherine Mann has been seen as the most likely disagreement.
Consumer prices increased in December a year 2.5 percent, more slowly than analysts expected, near an official goal of 2 percent and significantly lower than double -digit levels recorded 2022.
The service inflation, which Boe is carefully viewed as a measure of fundamental price pressures, slowed down at 4.4 percent in December with 5 percent earlier.
However, higher energy prices can encourage inflation in the coming months. Pantheon Macroeconomics analysts said Boe could predict the annual growth of CPIs of 3 percent or more in the second quarter of 2025, which is significantly over November of about 2.6 percent.
Chancellor Rachel Reeves’ decision to contribute to the contribution of the National Employer Insurance, together with the sudden increase in the national minimum wage, increased the work costs, which is Boe on guard to increase the prices transferred to consumers.
This has been evidence of the weakening of the economy, which will probably decrease in growth and inflation in the long run. In December, Boe said that Zero was expecting zero growth in the last quarter of 2024, a weaker than a 0.3 percent extension forecast forecast.
Some economists expect that Boe will have to reduce the forecast by 1.5 percent of GDP this year.
MPC will have to face a potential “stagflation shock,” said Rob Wood of Pantheon. “All surveys now show the slowdown of growth and inflation pressure, but they differ in the severity of the move.”
Among those who observe Boe’s decision and reaction in the bond market will be Reeves, who awaits a key set of forecasts from the Budget Liability Office in March.
Sales in gilded markets in early January has triggered the concern that the head against the Reeves rule on the key deficit-the current consumption must be funded by tax income by 2029-30.
Last week, the European Central Bank reduced the reference value rate for a quarter point to 2.75 percent, while the bank of Canada reduced its key footpart by half a point to 3.25 percent. In contrast, US federal reserves left rates unchanged to 4.25 to 4.50 percent, as forecasts, including the IMF, expect that the US will surpass other G7 economies this year.
